Structured settlements: Providing economic peace of mind
"Many people view

those who receive

lump sum payments

as just the recipients of a big financial windfall."

Each year, tens of thousands of people in the United States win settlements as plaintiffs in personal injury cases that may have stretched on for years. The road to settlement is an uphill battle, often leaving plaintiffs unemployed and coping with injuries. This situation can quickly deplete savings and result in the need for people to borrow money from family or incur large amounts of debt just to stay afloat. At this time of vulnerability, the idea of receiving a lump sum settlement could be very attractive. But many financial experts agree that structured settlement payments, like those offered by American General Life Insurance Company, may be the smarter option long-term.

"Many people view those who receive lump sum payments as just the recipients of a big financial windfall," says Susan Bradley, founder of Sudden

Money Institute. "However it's important to remember that those involved in

personal injury accidents are going through more than just a financial event, it's a life event. So it is vital for these people and their families to deal

with this new reality carefully and take the time to make the best financial decision possible for their future."

While a lump sum can earn a considerable amount of interest when invested or placed in a high-yield savings account, the interest earned (not the sum itself) is subject to state and federal income tax regulations. This can add up quickly even on a modest settlement. Additionally, after years of research, the federal government discovered that those who receive large financial windfalls often find themselves bankrupt a few years down the road. Money is spent rapidly and recipients of cash awards do not make smart longterm financial decisions. So in 1982, the U.S. Congress enacted the Periodic Payment Settlement Act to protect victims of personal injury cases and their families. This year marks the

25th anniversary of this important Act.

Instead of taking a lump sum at the time of settlement, the injured party or the surviving family members in a wrongful death suit have the option of

receiving payments for life via an annuity contract issued by a reputable life insurance company, such as American General Life. Structured settlements are free from state and federal income taxes. Payments made in structured settlements are non-taxable by state and federal tax guidelines outlined in Section 104(a)(2) of the Internal Revenue Code. That means every single payment received is tax exempt.

"In addition to the tax benefits, structured settlements provide peace of

mind and other benefits," adds J.P. Steele, president of structured settlements of American General Life and immediate past president of the National Structured Settlements Trade Association (NSSTA). "The payments can be customized to meet the individual's need, including the timing of payments as well as the amounts distributed. For example, the individual can receive a set stream of payments punctuated by larger individual payments to help cover major life events such as

mortgage, loan payoffs, college tuition or ongoing medical procedures."

People should know about structured settlements even though the majority of Americans may never need to worry about using one, she adds.

To find resources on how to handle the major life decisions you need to

make after you receive sudden money, contact the Sudden Money Institute at

www.suddenmoney.com . To learn more about the benefits of structured settlements and to find out if this option is right for your situation, visit

www.nssta.com or www.americangeneral.com/ structuredsettlements.

Structured settlement summary

• Smarter long-term

financialinvestment

than a lump-sum settlement

in most cases • Non-taxable by state and federal tax guidelines

• Customized payments to meet individuals'

needs

• Peace of mind that

funds won't run out

prematurely

• Backed by reputable

companies, such as

AIG